Winning Streak: Venture Capital Deals Top $5 Billion for Third Consecutive Quarter

Surge in IT investments, especially for software, is offset by major decline in biotech deals. Most interest in three years for seed, early-stage deals drives huge spike in growth.Venture capital investments grew slightly in the second quarter, topping $5 billion for the third straight time, according to Ernst & Young and VentureOne.

An increase of 11 percent pushed VC investments to $5.1 billion.

In its MoneyTree report, PricewaterhouseCoopers, Thomson Venture Economics and the National Venture Capital Association reported a higher figure of $5.6 billion — a 17 percent increase from a year ago, according to media reports.

Seed and first-round investments generated the most action in three years — some 32 percent of the total, the report said. The surge in initial public offerings and other exits helped drive the growth, said John Gabbert, vice president of worldwide research at VentureOne.

Leading the way was the information technology sector, which generated 294 transactions worth some $3 billion, according to the E&Y and VentureOne report.

However, investments in biotech and pharmaceutical firms plunged by 45 percent to $810 million. The drop ended a consecutive growth streak of five quarters for that sector.

Software firms drew $1.4 billion in 153 deals. The number of deals was the same, but the value of the new deals represented a 22 percent increase, the report said.

“Information technology companies received larger infusions of venture capital this quarter, especially in second and later round financings,” said Rick Fezell of E&Y’s Emerging Markets group, in a statement. “The median amount raised in those deals was about $10 million, and the overall median investment in an information technology company was $8 million, the highest level since mid-2001.”

Health care investments grew by 4 percent, generating 117 deals and $1.5 billion.

In the PwC-Thomson-NVCA report, North Carolina firms reported $81 million in deals for the quarter, according to The News & Observer.